Partial withdrawal is a transaction where a policyowner removes a portion of the account or cash value from a life insurance or annuity contract while keeping the policy or contract in force. In universal life and variable universal life, partial withdrawals typically reduce cash value and may also reduce death benefit depending on whether level or increasing options are in place. In annuities, partial withdrawals may be subject to surrender charges if they exceed free withdrawal limits during the charge period. Partial withdrawals offer flexibility for accessing funds without fully surrendering the contract, but they can affect long-term performance, guarantees, and potential tax liabilities.

In everyday planning scenarios, advisors recommend partial withdrawals when clients need cash for specific goals, such as education costs, debt reduction, or supplemental retirement income, but still value ongoing coverage or annuity benefits. They use in-force illustrations to show how different withdrawal amounts and timing impact cash value, guarantee durations, and death benefits. Advisors also compare partial withdrawals with policy loans, explaining that withdrawals permanently reduce values while loans can theoretically be repaid, although large unpaid loans can drive policies toward lapse. For annuities, producers review surrender schedules, free withdrawal provisions, and potential tax reporting, ensuring clients know that withdrawals from nonqualified annuities are generally taxed as ordinary income to the extent of gain. By understanding partial withdrawal mechanics, advisors can help clients access funds strategically while maintaining the core protection or income features that drove the original purchase.